7.3 Panel3 Phillipines

PHILIPPINE GOVERNMENTs
Journey Towards
Accrual Accounting
ASIA PUBLIC SECTOR ACCOUNTING & REPORTING CONFERENCE
14 September 2015 Kuala Lumpur, Malaysia
By:
LUZVI PANGAN CHATTO
Director IV
Commission on Audit
Republic of the Philippines
Presentation Outline
PART I: The Accounting Reforms: The beginnings
PART II: Progress and Challenges: What we have

done so far and what are the challenges we
faced
PART III: Lessons Learned: What should have been

done or avoided
PART IV: Moving Forward: Where we need to go
14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 2 2

PART I
The Accounting Reforms:
The beginnings

2007 PFM System Evaluation
Public Expenditure and Financial
Accountability (PEFA) Diagnostics:
Evaluated PFM system against benchmarks of a
good PFM of the Organisation for Economic Co-
operation and Development (OECD) and World
Bank (WB)
Conducted by WB and AusAID
PEFA Assessment Report released in 2010

6 Benchmarks of a Good PFM
Credibility of the budget

Comprehensiveness and transparency
Policy-based budgeting
Predictability and control in budget
execution
Accounting, recording and reporting
External scrutiny and audit

PFM Cycle and Gaps
PREPARATION
lack of budget credibility

budget not results-based
lack of funding predictability AUTHORIZATION
ACCOUNTABILITY
weak budget oversight by Congress
and the public
weak cash management system
no common budgetary and accounting classification

weak monitoring of contingent liabilities
EXECUTION
* Based on 2007 PEFA Assessment

Findings on PEFA Assessment
Comprehensiveness and Transparency
Budget classification was reasonable; BUT
classifications for budget execution
reporting and accounting differed from
budget classification.
Most other aspects of comprehensiveness
and transparency were good.
However, public access to key fiscal
information was limited.

Findings on PEFA Assessment
Accounting, Recording, and Reporting
Weakest part of the PFM system.
Accounts reconciliations often not undertaken.
Comprehensive data on resources to service
delivery units not collected.
Departmental in-year budget reports not
compatible; hence not comparable with the
consolidated budget.
COAs annual consolidated financial report
inadequate, as departmental financial statements
were based on pre-closing trial balances and only
partially audited.
PFM Reform Roadmap (2011-2016)
Master plan for modernizing the financial

management system of the government
Improve efficiency, accountability and

transparency of public fund use
Contribute to good governance and fiscal

discipline as a strategy for inclusive growth
and poverty reduction
Jointly formulated and approved by fiscal

oversight agencies (COA, DBM, DOF-
BTr) from 2009 to 2011
For 2015 to 2016, updated roadmap design

is moving its focus from policy to
implementation
PFM Strategies and Outputs
PFM REFORMS ROADMAP
GIFMIS Better
Results Treasury
Real Time Contingent
Management
Outputs Based Single
Financial Liabilities
of Contingent
Budgeting Account
Information Liabilities
1. Build up 2. Review 3. Capacity 4. Improve 5. Develop

Major Credibility Fund Release Building for Treasury Cash and
Strategies of PFM Procedures Congress and Management Implement
CSOs Operations GIFMIS

PFM Reform Projects
Government
Integrated
Financial
Management
Information
System
(GIFMIS) Budget
Reporting
Capacity and
Building Performance
Standards
(BRPS)
PFM
Reforms
Roadmap
Accounting
Liability and
Management Auditing
Reforms
Improved
Treasury
Cash
Management
Operations

Accounting and Auditing Reform Project
A key PFM reform project led by COA

Aims at:
harmonizing accounting and auditing rules
with international standards
improving participatory audit of multi-sectoral
programs and projects

Accounting and Auditing Reform Project
14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 13

PART II
Progress and Challenges..
What we have done so far;
What are the challenges we faced

Rolling Out Key PFM Reforms

Creation and Functions of the PSAcSB
Creation:
Created under the 2008 COA Organization Restructuring
pursuant to the 1987 Philippine Constitution which vests on
the COA the exclusive authority to promulgate accounting
rules and regulations
Functions:
Assist the Commission Proper in formulating and
implementing public sector accounting standards
Establish and maintain linkages with international bodies,
professional organizations and academe on accounting
related fields on financial management

Government Accountancy Sector
ORGANIZATIONAL STRUCTURE
Office of the
Assistant Commissioner
Accounting Systems Development

Government Accountancy
and
Office
Other Services Office
GAS-N I LGAS CGAS ASDOS-N ASDOS-L
GAS-N II PDMAS ASDOS-C TAHDS
07/01/2015
18
Major Functions of COA-GAS
As mandated by the 1987 Constitution, GAS assists COA in:
GOVERNMENT
ACCOUNTANCY
Promulgating SECTOR Performing Other
Accounting Rules Functions/Services
and Regulations
Keeping the Submitting an Annual

General Accounts Financial Report covering the
of the Government financial condition and
operation of the Government

Promulgation of Accounting Rules and Regulations
Key Activities:
Conduct continuous study and evaluation of
accounting standards both international and local;
Formulate/Recommend policies, rules and
regulations on government accounting for
implementation in the NGAs, LGUs and GOCCs; and
Act as secretariat for the COAs Public Sector
Accounting Standards Board (PSAcSB) concerning
NGAs, LGUs and GOCCs.

Key Accomplishments on the following areas:
Philippine Guidelines on Conversion

Public Sector Revised Chart of the Philippine
Accounting of Accounts (RCA) Government Chart of
Standards Accounts (PGCA) to the
(PPSAS) RCA
Installation/
Government Implementation of
Accounting Manual Issuance of COA Enhanced eNGAS
(GAM) for NGAs Circulars and eBudget System
to implement PPSAS,
RCA and UACS

PPSAS Development and Adoption Process:
Developed 25
Revised Adopted 25 Philippine
PPSAS and
Studied and Decided/
PPSAS and
drafts of 25
PAG under Public
evaluated Found that 28 PPSAS and
applicability IPSAS were
PAG and
PAG based on
COA Sector
exposed Resolution
of 32 IPSAS applicable in
drafts to
comments/ 2014-003 dated Accounting
the Philippine suggestions
in Philippine
Government
stakeholders/
of FGD
January 24,
2014, effective
Standards
setting interested
Operation
parties
participants/ 1 January 2014 (PPSAS)
stakeholders

Considerations/Factors in Developing PPSAS
Existing laws, financial reporting, accounting rules

and regulations;
Pronouncements issued by the IPSAS Board;
Best accounting practices, both local and
international;
Capacity of agencies to comply with PPSAS;

Fundamental issues
? Where an accounting principle or a significant
element of a disclosure requirement contained
in IPSAS is considered to be in conflict with the
Philippine laws, rules and regulations
this would be regarded as a fundamental issue
and the accounting principle or disclosure
requirement may be changed.

Statutory authority
? Where the international standard deviates from
the Philippine regulatory or legislative
environment
Philippine Application Guidance (PAG) shall be
issued accordingly.

Disclosure requirements
Disclosure requirements may be amended when

the amendments are regarded as being
significant for improving the presentation of the
matter.

PPSAS Numbering
The PPSAS is assigned the same number as the IPSAS to
maintain the link.
Where a PPSAS is developed and there is no equivalent
IPSAS, the Standard will be assigned a number in a
series of PPSAS starting with 101.
When IPSASB subsequently issues the equivalent
Standard as an IPSAS, the 100 series PPSAS will be
withdrawn and reissued as a PPSAS with the IPSAS
number.
Standards of PPSAS have equal authority regardless of
the numbering used.
No. of
Action
IPSAS
Adopted and implemented in
Philippine
2014 (Nos. 1-6, 8, 9, 12, 13, 14, 16, 25 Public
17, 19-21, 23, 24, 26, 27, 28-32) Sector
Accounting
Standards
Being evaluated, for possible (PPSAS)
3
adoption in 2015 (Nos. 18, 22, 25)
Not adopted (No. 7, 10, 11) 3
Superseded (No. 15) 1
Total (2012 Edition) 32

No. of
PPSAS
PPSAS
Volume I (Nos. 1-6, 8, 9, 12, 13) 10 Philippine

Public
Sector
Volume II (Nos. 14, 16, 17, 19-21, 23, Accounting
Standards
10
24, 26, 27) (PPSAS)
Volume III (Nos. 28-32) 5
Total 25

Key Accomplishments:
RCA for National Government
Agencies (NGAs)
Revised the New Government Accounting
System (NGAS) Chart of Accounts prescribed
in September 2004
Revised
Chart of
Provided new accounts for the adoption of the Accounts
PPSAS to enhance the accountability and
transparency of the financial reports, and (RCA)
ensure comparability of financial information
Adopted the RCA for NGAs in January 2013,

to be implemented effective 1 January 201 4

RCA for Local Government Units
(LGUs)
Exposed proposed RCA for LGUs
for comment users/stakeholders in Revised
July 2015 Chart of
For Government-Owned or Accounts
Controlled Corporations (RCA)
(GOCCs)
Proposed RCA for GOCCs for
exposure by September 2015

Issued under COA Circular No.

2014-003 dated April 15, 2014 Guidelines on
Conversion of
the Philippine
Provided guidelines and revised Government
description/title of accounts for the Chart of
proper implementation of new and Accounts (PGCA)
revised accounting policies to the RCA

Exposed draft GAM in March and
April 2015
Revised draft GAM based on FGD
participants comments/
recommendations in May-June 2015
Government
Submitted revised GAM to Accounting
Commission Proper for approval in Manual for
July 2015 NGAs
GAM approved on September 4,
2015

COA Circular
Subject
No./Date
Supplemental Guidelines on the
2015-002, Preparation of Financial Statements for
March 9, 2015 2014, in line with PPSAS and UACS Issuance of
Implementation COA Circular
Classification of all Government Business on Accounting
Enterprises (GBEs) or Non-GBEs for the Matters
2015-003, purpose of determining the applicable
April 16, 2015 Financial Reporting Framework in the
preparation of their FS and Prescribing
Guidelines therefore.

Installation/
Implementation
of Enhanced
eNGAS and
eBudget System
to implement
PPSAS, RCA and
Enhanced Electronic New UACS
Government Accounting System
Enhanced Electronic Budget System

Submission of Constitutionally-required Annual Financial Reports
Annual Financial
Reports
Annual Report on
Appropriations, Annual Financial Reports
for: National Government
Allotments, Obligations
and Disbursements
Local Government
Government-Owned or Units
Controlled Corporations

Submission of Constitutionally-required Annual Financial Reports
Development and Implementation of User-friendly
Web-based AFRS and BFARS
ANNUAL FINANCIAL REPORTING BUDGET AND FINANCIAL

SYSTEM ACCOUNTABILITY REPORTING
SYSTEM

Capacity Building
Key Accomplishments
Trained 1,030 Auditors from
COA Regional Offices
Started preparing
eLearning Modules for
Customized PPSAS PPSAS (PPSAS 16)
Capacity-
Training for 10 NGAs
Building/
Trainings on
PPSAS and the Trained 1,327
RCA accountants of
Trained 1,144
NGAs
trainers-auditors on
PPSAS

Capacity Building
Prepared Capacity-Building/Training Plan and

Courseware on GAM for the following target
participants:
COA and Agency Executives2-day training
COA Auditors and Agency Accountants
5-day training
Agency Budget Officers and other Finance
Personnel 2-day training

Capacity Building
Conducted Functional and Technical Training on
Enhanced eNGAS and eBudget System
As of 15 August 2015 2014 2015 Total
No. of Agencies 32 44 76
No. of participants from Agencies 238 292 530
No. of COA Participants 45 13 58
Total no. of trained Participants 283 305 588

Capacity Building
Online tutorial for Annual Financial Reporting System and

Budget and Financial Accountability Reporting System

Challenges
FS/reports of LGUs and GOCCs for 2014 were not yet
PPSAS-compliant due-to phased implementation of
PPSAS and revision/updating of RCAs.
Not all agency personnel concerned and COA auditors
have attended capacity building on PPSAS, RCA, UACS
due to varied reasons (e.g., time and funding
constraints)
GAM for NGAs has just been approved on September 4,
2015; GAM for LGUs and GOCCs have yet to be
prepared.
Adoption of the 3 PPSAS (No. 18, 22 and 25) in 2015, as
envisioned, may not be possible.
Conversion of accounts using manual and computerized
applications
PART III
Lessons Learned..
What should have been
done or avoided

Lessons Learned
Gains achieved
The process of development and adoption of
PPSAS is considered timely, acceptable and
responsive to the demands for PFM reforms.
The PPSAS, as aligned with the prevailing
international standards, provide quality
accounting standards, thereby:
enhancing the quality and uniformity in financial
reporting by Philippine public sector entities, and
ensuring accountability, transparency and comparability
of financial information with other public sector entities
around the world.
Lessons Learned
What should have been done
Revision of Charts of Accounts and updating of
Government Accounting Manuals for use by
NGAs, LGUs and GOCCs immediately after the
approval of the PPSAS
Timely issuance of supplemental guidelines on
the preparation of FS for 2014, in line with PPSAS
and UACS implementation
Intensified Capacity building to ensure smooth
implementation of PPSAS, RCA and accounting-
related

Lessons Learned
What should have been done
Immediate enhancement of existing application
systems to conform to PPSAS, RCA, UACS and
implementation of enhanced versions to facilitate
conversion of databases.

PART IV
Moving forward..
Where we need to go

Moving Forward: Planned Next Steps
The Administration has identified the need for reform irreversibility.
- Irreversibility begins with effective implementation;

Government agencies take responsibility for delivering reform
outputs, and turning outputs into improved practices that agencies
buy into.
- Sustainability can then be enhanced

through embedding reforms in legislation
and ensuring that the responsibility for
maintaining and monitoring policy is
embedded in oversight agencies.

Focus is now on implementation
from the design phase.
Comprehensively adopted by the
PFM Committee on May 13, 2015
Includes adoption of the Budget
and Treasury Management System
(BTMS) as a new approach for the
integration of the Governments
FMIS
Highlights the need to reconstitute
and expand the governance
structure
With the reforms now moving into
implementation, it is important to
formally embed reform functions
into agencies on a permanent
basis.
The Updated PFM Roadmap Summary (2015-2016)
Benefits
Allocation Efficiency | Operational Efficiency | Fiscal Discipline | Transparency
Oversight and spending agencies put new policies, processes,

systems and skills into practice.
1. Draft PFM Law.

2. Establish Comptroller General to develop and oversee financial management policies.
Policy 3. Conduct contingent liabilities analysis as basis for policy framework.
Information Frameworks
4. Refine and stabilise the unified account code structure.
5. Refine reporting requirements.
6. Maintain accounting and audit standards.
Process Budget Cycle: Preparation and Execution

7. Assist agencies to use UACS correctly.
8. Strengthen performance orientation of budget management.
9. Strengthen cash management.
Technology 10. Implement systems for improved budget preparation and execution.
11.Implement comprehensive human resource information system.
People & 12.Develop and pilot curriculum with sustainable delivery model.
Organisations
Fast track the preparation of the RCAs and GAM for
LGUs and GOCCs to support PPSAS implementation
Intensify capacity building; continue the preparation of

eLearning modules
Enhance eNGAS and eBudget System for LGUs and

GOCCs to make them PPSAS and RCA-compliant and
intensify implementation thereof.

Continue the study/evaluation of other IPSASs for
possible adoption effective January 1, 2016:
No. Description
18 Segment Reporting
22 Disclosure of Financial Information about the General
Government Sector
25 Employee Benefits
34 Separate Financial Statements
35 Consolidated Financial Statements
36 Investments in Associate and Joint Ventures
37 Joint Arrangements
38 Disclosure of Interests in Other Entities

Establish and maintain linkages with
international bodies, professional organizations
and academe on accounting related fields on
financial management through knowledge
sharing, attendance in conferences, conventions
and fora and other capacity-building events
Upgrade/Maintain application systems to

facilitate timely, quality, and reliable accounting
and other financial reports, and promote
accountability and transparency in government
operations

Questions?
54 54
55 55

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PHILIPPINE GOVERNMENTs

PART I: The Accounting Reforms: The beginnings

PART II: Progress and Challenges: What we have

PART III: Lessons Learned: What should have been

PART IV: Moving Forward: Where we need to go

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 2 2

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 3 3

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 4 4

Credibility of the budget

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 5 5

lack of budget credibility

no common budgetary and accounting classification

* Based on 2007 PEFA Assessment

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 6 6

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 7 7

Master plan for modernizing the financial

Improve efficiency, accountability and

Contribute to good governance and fiscal

Jointly formulated and approved by fiscal

For 2015 to 2016, updated roadmap design

PFM REFORMS ROADMAP

1. Build up 2. Review 3. Capacity 4. Improve 5. Develop

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 10 10

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 11 11

A key PFM reform project led by COA

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 12 12

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 13

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 14 14

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 15 15

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 17 17

Accounting Systems Development

GAS-N I LGAS CGAS ASDOS-N ASDOS-L

GAS-N II PDMAS ASDOS-C TAHDS

Keeping the Submitting an Annual

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 19 19

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 20 20

Key Accomplishments on the following areas:

Philippine Guidelines on Conversion

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 21

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 22 22

Existing laws, financial reporting, accounting rules

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 23 23

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 24 24

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 25 25

Disclosure requirements may be amended when

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 26 26

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 28 28

Volume I (Nos. 1-6, 8, 9, 12, 13) 10 Philippine

Volume III (Nos. 28-32) 5

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 29 29

Adopted the RCA for NGAs in January 2013,

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 30 30

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 31 31

Issued under COA Circular No.

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 32 32

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 33 33

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 34 34

Enhanced Electronic Budget System

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 35 35

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 36 36

ANNUAL FINANCIAL REPORTING BUDGET AND FINANCIAL

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 37 37

14 Sept. 2015 Philippine Governments Journey Towards Accrual Accounting 38

Prepared Capacity-Building/Training Plan and